NFT stands for“non-fungible token” and is quite simply a unique proof of ownership for something that is not physical, such as digital files like art, music, videos, objects in video games and other pieces of creative work. NFT is a unique code, stored and protected on a publicly available blockchain.
NFTs have been around for years, only blowing up recently in the realm of digital art.
Most common example of NFTs today is digital artwork, it could be a whole host of things. GIFs, songs, videos, tweets, digital skins for games etc.
The token section refers to its digital existence and the fact that it is protected using blockchain technology.
How do NFTs work?
NFTs exist on blockchain because they help to store information in a way that makes them difficult to replicate, steal, or manipulate.
Blockchains are the technology that makes certain cryptocurrencies like Ethereum work.
Blockchains are a term you’ve likely heard before as they quickly became a popular concept in the digital age. A blockchain is a distributed digital ledger, or in other words a shared electronic database.
Owning an NFT gives you exclusive rights to it because an NFT can only have one owner at a time. The unique data contained within the digital asset makes it easy for you to verify its authenticity and ownership. You can also store specific information within NFTs, such as a signature that further makes it an original or traceable to the original owner.
To buy NFTS, you need a cryptocurrency. This is usually one called Ether which uses the Ethereum blockchain. However, there are other digital currencies on different blockchains that can be used, depending on where you purchase your NFT.
What are the benefits of NFTs?
NFTs can’t be spent several times in a single transaction, making them impossible to duplicate. This also makes it easier for projects that use Ethereum’s blockchain to manage their supply easily since they know exactly how many digital assets exist at any given time.
NFTs can’t be stolen, or otherwise inflated – which makes it easier for developers to manage their projects’ supplies while still following relevant government regulations. Since they’re also non-fungible tokens that live on the blockchain, some have compared it to owning a rare, digital asset that can be traded peer-to-peer with little to no risk of fraud.
Where can I buy NFTs?
So you’ve got some Ether (or another cryptocurrency for NFTs), where do you go to make a purchase? Unfortunately the world of NFTs and crypto exchanges is a bit like the Wild West: there are only a handful of legitimate places you can go to make a purchase without being ripped off.
One of the safe platforms is called OpenSea. This is where most of the NFTs you will have seen in the news have been uploaded and bought. It is also one of the exchanges with the most backing and regulation.
Does an NFT grant copyright ownership?
When you purchase an NFT, you might not be buying the complete ownership of that product. Yes, you do become the owner in the sense that it is now your property, and the ownership is traceable on the blockchain, but that isn’t always accompanied by the laws of copyright.
The exact laws for each NFT depend on the smart contract used but it can be questionable. If you buy a painting, do you own the rights? Can you claim that you are the painter? Probably not. Do you own it? Yes. So it’s the same idea with the NFT, says Ozair.
However, that doesn’t mean you can’t then make a profit from your NFT, even if you didn’t create it or own the full copyright. “If I own it, then I can sell it. Again, like a painting, once you’ve bought it you can then sell it on as it is yours to sell.”
What can an NFT be used for and what is the future?
Right now, most of the examples we see in the news are art NFTs. These can be pictures, illustrations, GIFs or other pieces of art people have created, but that isn’t the only form an NFT could take.
“The power of NFTs is the authentication. If you think about it, everything in our economy is transaction-based, even an email, a payment or sending money, these are all transactions and for them to be official, they need to be authenticated,” says Ozair.
“In the traditional world, we use all kind of intermediaries to make this work, whether you’re an artist trying to get authentication that your work is the original, or a bank making a payment, a marriage licence – all of these situations need a third party to declare their authenticity.”
While NFTs are mostly used for art and memorabilia right now, Ozair sees a future where they are mostly used for the authentication of a transaction, saving money, time and confusion.
How to Create an NFT
If you’ve gotten this far and you’re wondering if you can join the league of NFT millionaires, well, never say never. Here is a quick breakdown of the steps to creating an NFT:
Select your item: This can be anything you own the intellectual properties to. It should be unique because it’s the rarity of the item that gives it value.
Select the Blockchain you’ll use: The most popular one is Ethereum, but there are others like Tezos, Binance Smart Chain, etc., that you’ll need for minting your digital asset into an NFT.
Create your digital wallet: This is necessary because you’ll need some crypto to fund your investment. When your account is set up, buy some cryptocurrency — likely Ether since it’s the cryptocurrency of the Ethereum Blockchain. If you already own cryptocurrency, connect it to your digital wallet to be able to use it to create NFT.
Choose your NFT marketplace: This is where you’ll hopefully sell your NFT. Top marketplaces include OpenSea, SuperRare, Nifty Getaway, and more.
Mint your file: Most marketplaces allow you to mint your digital file. Upload the file to the platform following the minting instructions. You’ll be able to turn any file type into a sellable NFT.